Are Incitec Pivot shares set for a demerger?

The Incitec Pivot Ltd (ASX: IPL) share price has had a rough trot over the past week, deflating by 6.8%. Although, the bulk of the downward ride followed the release of Incitec’s investor day presentation yesterday.

Heading into Wednesday afternoon, shares in the explosives and fertiliser company are a touch away from trading flat. However, that means the Incitec Pivot share price is actually faring better than the S&P/ASX 200 Index (ASX: XJO). At last glance, the benchmark is 1.3% into a deep red display today.

Nevertheless, the looming question is: will Incitec Pivot split into two?

If management has their way

Yesterday, fund managers and investors were treated to Incitec Pivot’s investor day. The event foreshadows the unveiling of the company’s full-year results on 15 November. Though, looking at the presentation, you’d be forgiven for thinking it was a sales pitch for the separation of Incitec’s two businesses.

At 121 pages long, the presentation was an in-depth unpacking of the benefits of pulling apart the explosives division from the fertiliser segment. Of those 121 pages, 95 of them were dedicated to detailing future growth strategies and value unlocking opportunities for each separate component.

I’ll save you the arduous task of thumbing through all of those slides. The main point made by managing director Jeanne Johns and the team was that a separately spun-off explosives company — Dyno Nobel — would be able to relish in a more premium price-to-earnings (P/E) ratio.

Slide 22, as shown above, hits home this point from the Incitec Pivot management team. They believe that the market values the entire company on the more conservative multiple, irrespective of where each segment is in the cycle.

For this reason, management is adamant that a split would benefit shareholders. Speaking of which, shareholders will have the final say next year if the scheme receives board and regulatory approval.

How has the Incitec Pivot share price performed?

Despite management’s discontent with the earnings multiple, the Incitec Pivot share price has performed strongly so far this year.

In 2022, shares in the company have appreciated by 14.2% during a challenging period for most companies. However, the real question will be whether this impressive performance can hold up post-earnings in November.

The post Are Incitec Pivot shares set for a demerger? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Why Breville, Incitec Pivot, Magellan, and Super Retail shares are dropping
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/luSL8x1